In January of 2015, we discussed non-compete agreements here. In that article we explained that a non-compete agreement, like any other contract must be supported by “consideration” — that is to say that the employee must receive some benefit for signing a non-compete agreement. Otherwise, the non-compete agreement is invalid and unenforceable. (This is separate and apart for numerous other reasons that a non-compete agreement may be unenforceable — see our other articles.)
In our previous post, we noted that two years of continued employment would suffice as “consideration” — as a benefit to the employee sufficient to support the non-compete agreement. But that was still in the context of continued employment. Historically, the fact of employment itself was enough of a benefit to the employee to support a non-compete. That meant that if the employee signed the non-compete agreement as a condition of employment — at the time employment started — the element of consideration was met. Whereas, where the employer asked employees to sign the non-compete agreement after they started working, something more was needed. In the later situation, because the employee already had the job it was not a sufficient benefit to make the non-compete agreement valid.
In several cases, Illinois courts have now eliminated that distinction. Whether the non-compete agreement is signed before employment commenced or after, the fact of employment alone is insufficient unless it continues for two years. This is so even if the employee voluntarily resigns in that time rather than being terminated. Most recently, a new case McInnis v. Vroom Vroom, the Court noted that there is a bright line of two years of continued employment —23 months is not adequate. In the words of a dissenting judge characterizing the opinion “[u]Under the bright-line test the majority applies, had plaintiff worked for 1 year and 364 days before voluntarily resigning, the covenant would be unenforceable for want of consideration.” This is based upon language in a prior case that specifically states that “”Illinois courts have repeatedly held that there must be at least two years or more of continued employment to constitute adequate consideration in support of a restrictive covenant.”
Why is this important?
- Employees that have been forced to sign a non-compete without receiving anything in exchange for doing so may be able to void non-competes entirely if they have not worked for at least two years from the day they signed the agreements. This is so even if those agreements are signed at the commencement of employment.
- Employers that require their employees to sign non-compete agreements should provide an additional benefit beyond continued employment when requiring employees to sign a non-compete.
Most employers us a non-compete agreement that is copied or cookie-cutter. As a result, they are not tailored to a particular client or business interest. But with a proper analysis of your business, we can ensure that your non-compete agreement will protect your legitimate business interest and be enforceable.
If you have signed a non-compete or are concerned about whether a non-compete is valid you should consider having it reviewed by one of our Chicago Non-Compete attorneys at Maduff & Maduff. Contact us for any of your legal concerns today.